Question

You have a one-time chance to purchase an item for $5. The item can be sold to customers for $30. After one day, the item has no salvage value because it becomes rotten at the end of the day. It will then cost you $15 to properly dispose of any unsold items. You think you can sell 1,000 units in one day, but also know that the standard deviation of demand for the item is 50 units. How many units should you order?